SATURDAY MARCH 24, 2007

THE INTERNATIONAL FORECASTER

P. O. Box 510518, Punta Gorda, FL 33951-0518

An international financial, economic, political and social commentary.

Published and Edited by: Bob Chapman

E-mail Address

International_forecaster@yahoo.com

CHECK OUT OUR WEBSITE

www.theinternationalforecaster.com

SUBSCRIPTION and RENEWAL INFORMATION: 1-YEAR $129.95 U.S. Funds.   

Make check payable to ROBERT CHAPMAN (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951-0518. Please include name, address, telephone number and e-mail address. We accept Visa and MasterCard charges.  Provide us with your card number and expiration date.  We will charge your card US$129.95 for a one-year subscription.

Foreigners please use foreign U.S. dollar denominated checks or Money Orders.

Note:  We publish twice a month by surface mail or twice a week by E-mail. international_forecaster@yahoo.com

RADIO APPEARANCES:

         To check out all of our radio appearances click on this link below:

http://www.theinternationalforecaster.com/radio.php

US MARKETS

We fear the other shoe is about to fall. We have had a dead cat bounce in the market and the Chinese stock market, which in part caused the recent correction and has recovered. That by the way has the Chinese government very perturbed. The players are exiting the yen carry trade and the Swiss franc carry trade. The Swiss have just raised interest rates and it looks like they will do so again soon as speculators are exiting that carry trade as well. Another important event has been the accelerating meltdown of the $1.3 trillion subprime mortgage market. The failure in this market is affecting the better quality mortgage market, the junk bond market, the general use of risk speculation, the $600 trillion unregulated derivatives market and the more than trillion dollar hedge fund operations.

Tens of billions of dollars have already been lost and the contagion is spreading as the media tries to cover-up what is really going on. We are watching the disintegration to an extent of the entire mortgage market, which encompasses 25% of all outstanding credit. We predicted this three years ago and those who believe they are savvy discovered the problem a couple of months ago. This is a general meltdown and do not think it isn’t, and it has several years to go until the real estate sector is purged. This purging will affect other sectors of the financial markets as well. When all is said and done trillions of dollars will be lost. The subprime mortgage market should have never existed in the first place. It was created by the Fed as an unnatural set of building blocks under the house pyramid. These loans that should have never existed in the first place are what propelled the housing market upward. These unqualified buyers bought at the bottom of the pyramid pushing owners upward into more expensive homes. Now that subprime buyers can no longer propel that market higher it’s stagnated. Now the resets of adjustable rate mortgages begin. Many borrowers cannot qualify under the new tougher qualifications and most cannot make the increased monthly mortgage payments. Not only has the upward thrust from the bottom ended, but also about 50% of subprime borrowers are going to lose their homes, which will be thrown onto the market driving house prices lower. This is wealth destruction. A bubble created by Sir Alan Greenspan to prolong the collapse of our economy and financial system.

These problems reflect a systemic syndrome that has purposely been visited upon our economy and financial system. This all didn’t happen by accident. The elitists know what they are doing. Free trade and globalization didn’t just happen to us. It was planned as a gateway to world government years ago and it has been used as an instrument of power many times in the past. The problems of our vehicle industry just didn’t happen, they were planned just as the S&L fiasco was planned and our current subprime problems were planned. Our Congress hasn’t acted and won’t act because they do as they are told. They are either paid off or compromised. They march in locked goose step with the lying Treasury and our privately owned Fed. Our financial system passed the point of no return five years ago.  There is no way back, our entire financial system is coming down. What we do not know is at what speed, but the results are undeniably assured.

Housing lenders, banks and brokerage firms knew that the mortgage bubble would end in collapse, but short-term profits were more important than a lasting healthy natural system. Profits on subprime loans are 25% to 100% more costly than a standard mortgage for the borrower, thus it didn’t take much for all concerned to participate.

The housing bubble was Sir Alan’s farewell signature. He presided over the 1987 market collapse and the 8/88 creation of the Working Group on Financial Markets. Then there was the 1989-92 housing and market collapse, the down days of the mid-90s, the dotcom fiasco and the collapse of the stock market again. That was followed by the real estate bubble. A litany of failures.

In just six years Sir Alan in collusion with Fannie Mae and Freddie Mac created $15 trillion in new mortgage generations. That was three times the originations of the previous five years. This was the biggest bubble in modern history. The reason was to keep the economy out of recession or depression, to allow the bankers to make outrageous amounts of money and to create enough equity for cash out financing and equity loans to keep the economy afloat as the populace dealt with falling wages and higher inflation.

You ask what’s next? By the end of the year builders will start going under and that will complicate issues even further.

A New York Times/CBS News poll in February found that 85% of respondents thought it “not acceptable” for doctors to be paid by drug companies to comment on prescription drugs. They said such payments would influence the decisions that doctors made about patient care. That is a strong mandate the medical profession should be listening too.

Minnesota, Vermont, Maine, W. Virginia California and D.C. have passed laws requiring some level of disclosure of drug company marketing efforts. In Vermont, the state has collected three years of data on payments to doctors, but drug makers are allowed to keep records private by declaring them trade secrets. Seventy-three percent of payments to doctors in 2005 in Vermont were trade secrets. How’s that for abuse. The story goes on but you get the message.

Further to the subprime liquidity party created and funded by the Fed is further proof of complicity in that as guardians of stability of our banking system, they not only didn’t try to stop the lending to the totally unqualified, but they encouraged it. They were not rebuked at any time for their poor lending practices. Even to this day. The Fed is well aware of every blip in the economy. They knew full well loans were being made to people who should never have had a loan.

...

Congressional proposals are on the way to bail out millions of subprime borrowers on the verge of bankruptcy and foreclosures. This is not the answer, because they would have to be subsidized by other taxpayers indefinitely, because borrowers will never qualify because they simply do not have the income to make the payments. Subsidization would be a perpetual disaster. Where will the trillions of dollars needed every year come from? More off budget deficit spending? Do they really think foreigners would buy these bonds? This would throw America into bankruptcy. Are we to bail out the lenders who wrote this garbage? This would cause rampant hyperinflation; a collapse of the dollar and the economy.

Yes, there will be social and financial costs, but delaying the inevitable with government subsidies will take the entire economy down. This kind of legislation is politically self-serving. The politicians want to be benefactors and the lenders want to be rescued. Readers do not let this happen. You and your children and grandchildren will pay for it, over and over. Contact all of Congress now and tell them you want no bailout of borrowers nor of lenders. The blame is not on lack of government regulation; the blame sits clearing on the shoulders of the Fed, banks, other lenders, Wall Street and hedge funds. Let them bite the bullet. Do not let the socialists and fascists get away with this. Do not let government take the blame for the reckless greed and stupidity that has fostered this disaster. We are not in the business of personal and corporate welfare where profits are privatized and the losses are socialized. They, by the way, are already trying to do the same thing for the job losses due to offshoring and outsourcing. This is nothing less than supply side Keynesianism. This is what happens when you have free unregulated markets. Predatory lending practices that leave behind the toxic waste of subprime and ALT-A loans. Yes, the Fed is the main culprit followed by Fannie Mae and Freddie Mac, the lenders and the borrowers who either lied to get loans or should have never had them in the first place. Remember, the Fed is not the government. It is privately owned by national and international banks and other shareholders. We can see the bill coming in the distance – namely the Bill to Bail Out Deadbeats and Greedy Lenders.

Subprime lending should be stopped. We have seen the consequences of such lending already. There can be legislation in that area, what was wrong with 20% down and a 30-year fixed rate mortgage? Nothing, and we went to exotics because greed set into the socialist mindset. Subprime loans are deceptive, predatory and should never have been made in the first place.

The Fed says readings on inflation have improved mostly in recent months. That is true, in a relative sense, but their official figures unfortunately are bogus and they are well aware of that. They say inflation figures “seem likely” to moderate over time. This is economics by guess and by golly. They know right well inflation is headed higher, but they are not going to tell you that. In other words we are going to have higher inflation, but we hope it will go away. Yes, the Fed will settle for stagflation.

The yield curve inversion may be fading, which is an indication that the market has moved toward higher inflationary expectations, which are commensurate with the degree of slope in the curve. That is the bad news; the good news is gold is headed higher along with silver.

...

-- Posted Sunday, 25 March 2007 | Digg This Article